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Creating a Liability Stink Over Odor

Joseph Catanese | Sep 01, 2000

Apparently some people will do anything for free concert tickets, including live in a dumpster for a week. That's what some young women did to win free N'Sync concert tickets, which were being given away by radio stations in New York and Philadelphia.

But most people don't find trash entertaining. In fact, the slightest change in wind direction can prompt a much less enthusiastic response from a solid waste facility's neighbors. The potential for complaints, or worse yet - lawsuits - because of odor emanating from a waste facility, shouldn't be overlooked.

Although using odor control technologies can be effective, some of the best-laid plans can fail, and so can this technology. Likewise, good community relations are important. But when inadequately monitored operations keep neighbors indoors, the situation can put quite a strain on relationships.

What's your liability for an odor that doesn't sit well with the neighbors? Noxious odor can create a health hazard, but more likely, the biggest risk is what your neighbors perceive the odor will do to the value or enjoyment of their property.

If a community decides to bring a lawsuit against you, it can be expensive - regardless of the outcome. So, it's important to clarify your insurance coverage. Are claims that arise from odor covered under a standard general liability policy? That depends on the language of your policy. Typically, landfill odor is deemed a pollutant and would be excluded from a standard general liability policy.

Often, these claims are handled with a pollution policy. Pollution liability insurance is available and provides coverage for both bodily injury - should someone claim sickness from an odor - and property damage, including value diminution. Defense costs also are covered.

In 1997, the city of Danbury, Conn., - as well as a number of haulers and transporters - learned a costly lesson. The city found itself facing citizen lawsuits as a result of an odor coming from the municipal dump. Residents of Bethel, a nearby town, didn't like the "rotten-egg smell." According to the residents, their health was being compromised, and their property values were being adversely affected by the hydrogen sulfide gas being emitted by the dump. The residents' lawyer called it a "quality of life" issue.

Construction debris was suspected as the odor source. For two years, the city had collected $12 million in waste disposal fees for accepting demolition debris. To reduce its potential liability, Danbury tried to recover costs from waste haulers that used the dump.

In the end, the city filed suit against its insurance companies, which were unwilling to fully pay for the city's defense against its landfill's lawsuits. The insurance companies agreed to cover more than 58 percent of the costs, but Danbury officials maintained that those companies were obligated to pay all the costs.

Many courts have ruled that a decrease in market value caused by the "stigma" of pollution is compensable. Various courts also have ruled that a claim for nuisance exists - even if the air toxin level does not reach dangerous levels. As in Danbury's case, the neighbors did not fear significant health problems, but they certainly did not like, or want to live with, the smell.

Similarly, in 1998, residents living near a Buford, Ga., landfill sought damages, claiming that odor and noise from the facility were preventing them from enjoying their property as well as devaluing their homes.

In another case, one landfill faced insurance claims filed by local residents and a local business. The residents complained that blowing litter, odor and pigeon droppings were causing property damage, and restricting property enjoyment and use. They also perceived soil and groundwater contamination could affect their private wells. The business filed a claim to pay for lost revenues. In all, the four claims surpassed $150,000 in expenses, and was paid by the landfill's insurance company.

On a more positive note, some ingenious developers are using closed or soon-to-close landfills in marketing homes in new developments. With many former landfills being converted into golf courses, ski slopes or parks, nearby home values have been known to climb when these projects take off - and no one seems to be quick to create a stink about that.